Get Paid for Work from Abroad Without Opening a BusinessThe legal solutions that save you bureaucracy, time and headaches
You work from Israel for clients abroad and need to issue an invoice · without opening a dealer file? There is a legal way ·
In short
Getting paid by clients abroad requires issuing an invoice, but opening a self-employed file means monthly filings, advance payments and complex bookkeeping. Israelis who perform work for foreign companies have legal ways to get paid without becoming an osek murshe or an osek patur · the most popular of them is a payment company under the salaried-freelancer model.
- Payment company · issues the invoice to the client and pays you lawfully with a payslip.
- Fee of about 5% · instead of accountant fees, filings and advance payments.
- Social rights · pension, National Insurance, vacation and sick leave.
What are the challenges of getting paid by foreign clients?
Anyone performing work in Israel for a client with no representation in the country must issue an invoice. This requirement creates a significant obstacle for salaried employees who want extra income from independent projects, for students looking for flexible work and for anyone unwilling to deal with the bureaucracy of running a business.
The invoice requirement
Without an invoice you cannot lawfully receive payment for the work · and the foreign client usually requires a proper document for their own expenses.
Osek patur
Exempt from monthly VAT filings, but still required to open a file with the Income Tax Authority and National Insurance, and limited by an annual turnover ceiling.
Osek murshe
Required to file periodic VAT reports, keep orderly bookkeeping and submit annual returns · a heavy burden for someone who just wants to get paid.
Legal solutions for getting paid without opening a business
The common and legal model for getting paid by clients without opening a self-employed file is based on employment through a payment company. Under this method, the company issues the invoice to the client on your behalf, collects the payment and transfers the money to you with a payslip.
One-off casual transaction
A legal option for issuing a one-time invoice without opening a file. It fits isolated cases only, and requires visiting the VAT offices in person, reporting the transaction and paying the VAT on the spot. For anyone receiving payments on an ongoing basis · it is not practical.
Payment company · the salaried-freelancer model
The most popular solution · using a payment company holding a manpower contractor license. The company defines you as its employee, issues the invoice to the client and pays you a lawful salary. You enjoy the benefits of independent work while keeping a full salaried-employee status.
How does the process work in practice?
The process is relatively simple and fast. Here are the four steps · from agreeing with the foreign client to the payslip that reaches you.
Agree with the client
You agree with the foreign client on the scope of the work and the pay.
Sign up to the system
You sign up to the payment company system and enter the deal and client details.
Invoice and payment
Payslip
After deducting the fee and taxes · you receive your pay with a payslip that includes social rights.
Working with clients abroad? Issue an invoice without opening a file
Sign up in a minute, enter the deal details · and NETO issues the invoice to your foreign client and pays you with a payslip that includes full social rights.
Taxation and National Insurance aspects
Israel taxes on a personal basis · every Israeli resident must pay tax on their income, even when it originates abroad. According to the National Insurance Institute, an Israeli resident owes National Insurance and health contributions on income from work for foreign employers as well.
Everything handled for you
When you get paid through a payment company · the company withholds income tax at source, contributes to National Insurance and pension and provides an orderly payslip.
No annual returns
You are exempt from filing annual returns (subject to certain conditions) and from dealing with the tax authorities · everything is done within the employment relationship.
Full employee rights
Salaried status in every respect · pension contributions, National Insurance, vacation days and sick days, according to the insured-persons classification of the National Insurance.
Pros and cons of each solution
Opening an independent business fits those planning continuous business activity at significant volume. Using a payment company fits occasional freelancers, salaried employees with extra income and anyone who prefers to avoid bureaucracy. Here is the comparison.
| Criterion | Opening an independent business | Payment company · NETO |
|---|---|---|
| Opening a file with the authorities | Required · VAT, Income Tax and National Insurance | Not required · you keep salaried status |
| Filings and advance payments | Periodic filings and advance tax payments | Handled by the company · no personal filings |
| Bookkeeping | Accountant required · ongoing cost | Included in the service · no accountant fees |
| Expense deduction | Possible | Not relevant · salaried status |
| Social rights | The self-employed person's own responsibility | Pension, National Insurance, vacation and sick leave |
| Cost | Fixed expenses · accountant, filings | Fee of about 5% of the invoice amount |
| Fits | Continuous business activity at large volume | Occasional jobs and extra income |
Who is the service right for?
The solution of getting paid through a payment company fits several groups in particular · each enjoys a different advantage.
Salaried employees with extra income
They earn extra income from side projects · keep their salaried status and avoid opening a file.
Students and freelancers
They work as freelancers and enjoy flexibility with no long-term commitment · and no bureaucracy.
One-off jobs
Professionals doing one-off or periodic jobs · spared the hassle of running a small business.
Getting paid from abroad without opening a business · questions and answers
Can I issue an invoice without opening a business?
How much does it cost to issue an invoice abroad without opening a business?
Do I have to pay VAT on an invoice to a client abroad?
Am I entitled to social rights through a payment company?
What is the difference between an osek patur and an osek murshe when working for clients abroad?
Is an Israeli resident liable for tax on income from a foreign client?
Summary
Getting paid by foreign clients does not have to be complicated. Instead of opening a dealer file with all its bureaucracy · a payment company holding a manpower contractor license issues the invoice to the foreign client, collects the payment in foreign currency and pays you with a payslip that includes social rights. The fee is about 5% of the invoice amount, and all tax and National Insurance aspects are handled for you. NETO · an automated employment system, manpower contractor license 1565, supervised by the Ministry of Labor, operating since 2016.
- No dealer file · you keep salaried status, with no filings and no advance payments.
- Fee of about 5% · instead of accountant fees, filings and advance payments.
- A payslip with rights · pension, National Insurance, vacation and sick leave.
Guides you may find useful
Everything you need to work with clients abroad and get paid with no headaches ·
**It is important to clarify that NETO provides full social benefits by default, but the worker or the employer do not always choose this, and the employment agreement will therefore specify it. NETO also operates in some cases under labor law and in other cases under the classification of employers and determination of insured persons order · which varies according to the nature and duration of the work, the terms of the agreement and the definitions in law. There are times when the employer-employee relationship exists as a three-way relationship as defined in the Manpower Contractors Law.
***The information on this page provides a general overview only and does not constitute legal, accounting, tax or any other professional advice. Use of this information is at the reader's sole responsibility and it should not be relied upon for making decisions. Before taking any action, it is recommended to consult a qualified lawyer, accountant or tax advisor. NETO services are provided, depending on the circumstances, in accordance with labor laws and the terms of manpower contractor license no. 1565.
Working with clients abroad? Start without opening a business
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